France Telecom Is Examining to Buy TeliaSonera, Telenor for about $60 billion
France Telecom SA, Europe's third- largest phone company, is considering the acquisition of Sweden's TeliaSonera AB or Norway's Telenor ASA.
Beatrice Mandine, a spokeswoman for the Paris-based company, confirmed comments by Chief Financial Officer Gervais Pellissier to the Financial Times that France Telecom is examining a number of companies including the Nordic operators. Le Figaro reported yesterday that France Telecom was considering a takeover offer for TeliaSonera, Sweden's largest phone company.
Buying TeliaSonera, with a market value of 223.2 billion kronor ($37.8 billion), or Telenor, which has a value of 170.9 billion kroner ($34.4 billion), would be France Telecom's biggest deal since it bought Orange Plc for 27.8 billion pounds ($55.1 billion) in 2000.
``France Telecom is back to its bad old ways,'' said Saeed Baradar, telecommunications sales specialist at Societe Generale, in an e-mail to clients today. ``France Telecom is looking at all possible targets, apparently an exhaustive list.''
France Telecom shares sank 1 euro, or 4.8 percent, to 19.86 euros in Paris, the lowest in more than eight months. They lost 6 percent yesterday after Le Figaro's report. TeliaSonera, which jumped 12 percent yesterday, fell 0.6 kronor to 49.7 kronor in Stockholm. Telenor rose 1.75 kroner, or 1.8 percent, to 101.75 kronor in Oslo.
Record Loss
Chief Executive Officer Didier Lombard previously said the company was seeking growth in emerging markets including Vietnam and Ghana, where mobile-phone use is growing faster than in the operator's main markets of France and the U.K.
France Telecom's European expansion in the 1990 resulted in a debt burden of 70 billion euros and a record 20.7 billion-euro loss in 2003 after writing down assets including German mobile- phone company MobilCom AG.
``We were hopeful that France Telecom would put a lid on speculation over TeliaSonera but instead the CFO has poured fuel on the fire with his comments,'' Dresdner Kleinwort analysts including John Davies said in a note to investors.
``A deal for TeliaSonera has little logic and if it goes through there is the potential for yet more downside in France Telecom shares,'' the Dresdner Kleinwort analysts said.
At the end of the 1990s, France Telecom and rivals came under pressure from investors to lift growth through takeovers as stocks soared and competition at home cut into profit at their traditional units.
`Change in Strategy'
Former CEO Michel Bon bought unprofitable enterprise-network operator Equant NV, Orange and a stake in MobilCom. He quit in September 2002 after provisions to end the MobilCom partnership led to a 12.2 billion-euro first-half loss.
``We never comment on market speculation,'' TeliaSonera Chairman Tom von Weymarn said in a telephone interview. ``If France Telecom comes in with a bid, we'll consider it from all owners' best interests.'' Scott Engebrigtsen, a spokesman for Telenor, declined to comment.
The Swedish government has said it plans to sell TeliaSonera shares. Sweden holds 37.3 percent of TeliaSonera and Finland owns 13.7 percent.
``It's a change in strategy for France Telecom,'' said Bengt Moelleryd, an analyst at Handelsbanken in Stockholm. ``It's easier to understand the Swedish government. It's interested in selling and to be part of the European consolidation.''
Lars Nyberg, TeliaSonera's CEO, is seeking growth in Eurasian countries including Kazakhstan to add to assets in countries including Spain, Turkey and Tajikistan.
Legal Disputes
The Swedish company is in a legal dispute over control of Turkey's Turkcell Iletisim Hizmetleri AS, of which it owns 37 percent, with shareholders Cukurova Group and Russia's Alfa Group. TeliaSonera is also in a dispute with Alfa over control of Russia's OAO MegaFon, Russia's third-biggest mobile-phone company, in which it has a 35.6 percent stake.
The ``key downside risk in our view and price target is France Telecom overpaying for control of assets,'' analysts at Goldman Sachs including James Sawtell said in a research note published yesterday. ``Megafon in Russia and Turkcell both have significant path-to-control challenges.''
A purchase of TeliaSonera would give France Telecom operations in Eurasia. The Stockholm-based company's sales in the region grew 22 percent to 10.3 billion kronor last year, or about 11 percent of its total revenue, fueled by subscription growth and increased usage in Kazakhstan and Azerbaijan.
TeliaSonera Acquisitons
Last year, TeliaSonera acquired mobile operators in Uzbekistan and Tajikistan and a minority shareholding in Afghanistan's largest wireless company. TeliaSonera also has mobile operations in Latvia, Lithuania and Estonia.
Telenor, the Nordic region's biggest phone company, has relied on eastern Europe and Asia for growth as it suffered at home from a saturated mobile market and falling revenue from fixed-line telephony.
Apart from its business in Norway and Denmark, Telenor fully or partially owns units in Ukraine, Russia, Hungary, Serbia, Montenegro, Malaysia, Bangladesh and Thailand.
``Telenor might be a more interesting deal,'' said Rob Goyens, an analyst at Dexia Securities, in a note to investors. ``Considering that France Telecom has recently confirmed being interested in a mobile license in Vietnam, Telenor's Asian operations might perfectly fit this picture.''
France Telecom has French government backing to buy TeliaSonera and would pay with stock to create Europe's largest telecommunications company, Le Figaro said yesterday, without saying where it got the information. France owns 26.7 percent of France Telecom.
``Financing is very likely to include a significant share payment,'' said Societe Generale's Baradar, whose research team contacted France Telecom's investor relations department.
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